unit 1 sales & distribution management

SALES AND DISTRIBUTION MANAGEMENT (MBA-MK-03)

UNIT-1

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University Syllabus

Introduction: Selling as a Part of Marketing, Sales Management Process, Role of Sales Manager, Concept of Personal Selling,

Sales Management and Salesmanship, The Ones of Personal Selling, Process of Personal Selling, Qualities of a Successful Salesman.

Goals in Sales Management: Goal Setting Process in Sales Management, Analyzing Market Demand and Sales Potential, Techniques of Sales Forecasting,

Preparation of Sales Budget, Formulating Selling Strategies, Designing Sales Territories and Sales Quota.

---------------------------------------------------------------------------------------------------------------------------------------------------Introduction of Sales

Sales management is defined as “the planning, direction and control of personal selling, including recruiting, selecting, equipping, assigning, routing, supervising, paying and motivating as these tasks apply to the personal sales force”.

Sales force is responsible for the sale of products of a company and to add profit to the business operations and fulfill social obligations. Sales force should be hardworking, result oriented, well educated and competent to handle changing situations.

Managing the Sales Force

Successful sales force management means:

The right organization and aggregation against product lines and geographies. The right strength and qualification. The right compensation and incentive system.

Nature or Characteristics of Sales Management

The nature and characteristics of sales management can be explained by:

1- Its integration with marketing management,

2- Relationship selling, and

3- Varying sales responsibilities.

Integration with Marketing Management

As sales management is a part of marketing management, sales planning should be integrated with marketing planning.

A company’s marketing team typically consist of two basic groups:-

1- Field Selling (or personal selling) team, and 2- Head-quarter marketing team.

These headquarter based service and support functions are:-

Promotion

Marketing Research

Marketing Logistics

Customer Service

Co-ordination

MBA-MK-03 SALES AND DISTRIBUTION MANAGEMENT (UNIT-1) BY: MAYANK PANDEY

Relationship Selling

Buyers and sales people, who do business together, have some type of business relationships. Their relationships have a range or spectrum.

Steps in Designing and Managing a Sales Force

I. Objective SettingII. Designing Sales Force: Structure and Size

III. Deciding Sales Force Compensation

IV. Recruiting and Selecting Sales ForceV. Guiding and Motivating Sales Force

VI. Performance Rating of Sales Force

Organizing and Managing a Sales Force (Sales forces are regularly assigned particular sales territories. Various factors are taken into account when deciding the sales force for a particular territory. These include the physical size of the force for a particular territory, transportation links within a territory, purchasing power of consumers and their educational and living standards.)

Roles and Skills of Modern Sales Managers

The role of sales manager in the modern company has changed. Instead of demanding, controlling, volume oriented sales manager, the modern and successful sales manager is a team leader rather than a boss to the salespeople.

Some of the important changes in the roles of the modern sales manager are as follows:-

Playing a strategic role in the company. Working as member of the corporate

team.

Working as a team leader. Multiple sales channels. Using Latest technologies.

Sales Manager’s Duties and Responsibilities

The following are some of the principal duties of a sales manager:


1. Organizing sales research, product research, etc.2. Getting the best output from the sales force under him.3. Setting and controlling the targets, territories, sales experiences, distribution expenses, etc.4. Advising the company on various media, sales promotion schemes, etc.5. Monitoring the company’s sales policies.

Types of Sales Managers/Sales Management Positions

Sales Management — Formulation of Sales Strategy

1. Determining the size of the sales force

2. Decision regarding type and quality of sales force required

3. Designing the sales organization

4. Territory designing

5. Recruitment and training procedures

6. Task allocation

7. Compensation of sales force

8. Performance appraisal and control system

9. Feedback mechanism to be adopted

10. Managing channel relationships

11. Coordination with marketing departments

Methods of Selling

Telemarketing: Selling Concepts on the Phone

Sales on the Internet

Mail Order Sales

Sales Through Large Scale Fixed Shop Retailers

Sales Through Wholesalers and Retailers

Direct Selling

Role of Sales Manager

Sales Manager as Coordinator


The sales manager performs the function of a coordinator also. He ensures that the other departments in the company are well informed of sales activities so that they can produce what is required, when it is required and whether the same can be produced with the existing facilities or it requires changes etc.

The sales manager also carries out coordinating work with the distribution network.

Sales Management and Control

Sales manager should act as per the objectives set by the organization. He should analyze:

present condition of the firm

the plans for future ways to achieve those plans.

Sales manager’s job is to exercise control over his staff so that on the one hand they may look for advice and on the other hand, they may give their best efforts and bring results.

Personal Selling

Personal selling identifies the unfulfilled needs of ordinary customers. It is true that many companies believe that direct selling would work in this country.

Amway, Avon, Modicare, Eureka Forbes are a few example of companies which are using personal selling (direct selling) and adding value for customer satisfaction.

Personal Selling-Introduction

Some important aspects of personal selling are:

1. It enhances customer’s confidence in the seller.

2. It promotes long-term business relations through personal intimacy.

3. It provides a human touch to business transactions.

4. It helps facilitate the seller to understand each customer’s needs and preferences more clearly.

5. It helps satisfy a customer by modifying the product as per the customer’s choice and preference.

6. Personal selling followed by personal service helps build long-term relations between the business and the customer.

7. It helps keep up with the competition in the market, based on product customization as per customer’s preferences.

8. It is a powerful and effective tool for convincing the customer about the product.

Changing Face of Personal Selling

1. Value Sharing: The salespeople share the same values as their customers and perceive the customer’s needs with the sole view to serve them better.

2. Relation Building: A value-based relationship helps the salespeople to constantly mobilize resources and modify the end product by catering to the specifics of the buyer. This culminates in building long-term relationships.


3. Role Playing: The salespeople, in personal selling, go far beyond realising sales volume. They act as consultants to their prospective customers constantly advising them of new products.

4. Changing Approach: personal selling comes in a package containing the inputs of the experts from different areas such as maintenance, installation, trouble shooting, delivery staff, sales personnel, etc.

Efficacy of Personal Selling

Personal Selling with Respect to Product Strategy

Since salespeople are in direct liaison with prospective customers, their input is valuable during product development. Their inputs help design the product based on customer preferences and needs. Products are changing very fast. Old products are being replaced. New products are tried. Some new products achieve acceptance from the customer, while some are forgotten and result in total loss to the manufacturer.

Personal Selling and Pricing Decisions

Sales personnel undergo requisite interaction with prospective customers to gauge their mood with respect to different price levels. Hence, their inputs are considered useful in formulating pricing strategies. The sales personnel are also well aware of the competitors’ price and, based on the market reaction and customers’ sentiments, they can advise a more prudent price policy to the management.

Personal Selling and Distribution

Whether the channel of distribution is direct or indirect, the sales force has a significant role to play. The end result of any distribution effort is the ready availability of the product to the customer, in the right quantity and at the right place. If the product is not available when it is actually required by the customer, then the whole business activity and all related efforts are rendered useless. In view of this, the sales force plays an important role in coordinating, liaisoning and advocating the product’s utility to the end user.

Personal Selling and Product Promotion

The sales force actually stimulates and generates enough interest in the customer and helps him make the final decision to buy the product. Sharing the same values that the customer does, a salesperson provides motivation and generates interest and confidence in the customer for the product. Without this effort the whole exercise of advertising and public relations would be futile. Advertising and public relations actually support the efforts of the sales force. And thus personal selling promotes a product.

Steps in Personal Selling


Prospecting

Acquaintance References

Cold Calling

Centre of Influence Method

Personal Observation Method

Direct Mail or Telephone Method

Company’s Records

Newspapers

Retailers

Other Methods

Pre-approach

1. It is a method by which a salesman concentrates only on the prospects and not the suspects, thus saving his time and energy.

2. It helps a salesman gain all the possible information about the prospect before approaching him. Hence any kind of loose talk or serious mistake can be avoided during the sales talk.

3. Because of the pre-approach method, the salesman gains ample knowledge about the prospect before approaching him. Hence, he is able to give a sales presentation more efficiently, effectively and with confidence.

4. It does not waste the prospect’s time and energy since the salesman is already aware of the needs and preferences of the prospect. As a result the sales presentation is focused around the needs of the prospect and is short, meaningful and to the point.


Approaching

1. Approach Adopted by Travelling Salesmen

A salesman may directly approach the prospect without any introduction whatsoever and then conduct an interview.

Another manner in which a salesman can seek an appointment with a prospect could be by sending an advance mailer explaining his product and its benefits vis-a-vis other products available in the market.

There is no better method of securing an appointment with a prospect than through a reference given by the friend, relative or business associate of the prospect.

Another effective way of securing an appointment and interview with the prospect is for salesmen to give away gifts to the prospects before asking for an appointment.

Sale letters have proved to be another kind of door opener. Such letters provide ample detail about the product, benefits and schemes available with the product.

2. Successful Approach

A successful approach enhances the sale and it is thus important for the running of a business. A failed approach will give an opportunity to the rival company. The approach helps in enlightening the prospect by providing him ample information about the product,

price, competitor’s product, benefits etc.

For an approach to be successful, given below are some key guidelines:

Prior Appointment

Timing

Command

Relaxed Atmosphere

Open Mindedness

Courtesies


Effective Presentation Follow up

3. Methods of Approach

Cashing in on Brand Name or the Company’s Reputation

Customer Benefit Approach

Innovative Product Opens the Door to the Salesman

The Premium Approach

The Shock Approach

The Approach of ‘Making the Prospect Feel Important’

The Survey Approach

Interactive Approach

Presentation and Demonstration

A good presentation is as important as a good product. The significance of a good presentation of the product can be gauged from the fact that many a time an attractively packed presentation is sufficient to sell the product. A good presentation can be in the form of attractive packaging and display, conspicuous placement of the product in the display window, etc. A good presentation also includes the interior decoration of the shop and appearance of the article.

The Close

This is the last stage of any sales presentation. The whole exercise becomes useless if the sale does not take place. Therefore, it is the most crucial stage for a salesman. The main aim of the close is to convince the prospect to sign the order form or to place an order immediately rather than in the future.

How to add value through personal selling…… (Process of personal Selling)


SALESMANSHIP

The basic features of salesmanship are as follows:

a. Salesmanship involves persuasion of customers: A salesman has the ability to convince the people to buy his product.

b. Salesmanship involves winning buyer’s confidence: Modern salesmanship aims at educating the customer and providing a solution to his problems. This helps in winning his confidence.

c. Salesmanship involves providing information: Salesmanship is an educative process. It tells customer the ways in which they can satisfy their needs. Salesman provides information about products available, their broad features and their uses and utility to the customers.

d. Salesmanship aims at mutual benefit: Salesmanship is a two way process. It results in benefits not only to the sellers but also to the buyers. It helps in solving the problems of the buyers and satisfying their needs. Customer satisfaction leads to increase the profitable sales volume for the salesman.

REQUISITES OF EFFECTIVE SALESMANSHIP

In order to practice effectively the highly skilled profession of salesmanship, wide knowledge and experience is necessary.

To be effective, a salesman should have knowledge of the following types:

1. Knowledge of Self

2. Knowledge of firm

3. Knowledge of product

4. Knowledge of competitors

5. Knowledge of customers

6. Knowledge of selling techniques

QUALITIES OF A SUCCESSFUL SALESMAN


To be successful, a salesman must possess several qualities:

1. Physical Attributes: A successful salesman must have sound health and pleasing personality. His job is demanding and his physique should be sturdy, free from disease and disability of all types.

2. Mental Attributes: A good salesman must have a high degree of intelligence and imagination. He should understand the customer quickly and read his mind accurately. He requires initiative to make additional sale and win permanent customers.

3. Social Attributes: A salesman has to deal with different types of customers. He should have the ability to get along with people of all types. Sociability implies good manners, a liking for people, sense of humour and conversational ability. Good salesmen need to be polite, self-disciplined and courteous.

4. Vocational Attributes: Salesmanship is a highly skilled vocation and requires ambition, aptitude and enthusiasm. A good salesman needs to have creative ability, leadership qualities, urge for excellence, optimism, etc. He must be fully familiar with firm, its products and customers, competitors’ products and selling products.

GOAL SETTING IN SALES MANAGEMENT

In business, goal setting has the advantages of encouraging participants to put in substantial effort; and, because every member has defined expectations set upon him or her (high role perception), little room is left for inadequate effort going unnoticed.

Managers cannot be constantly able to drive motivation and keep track of an employee’s work on a continuous basis. Goals are therefore an important tool for managers since goals have the ability to function as a self-regulatory mechanism that acquires an employee a certain amount of guidance Shalley, 1995 and Locke and Latham (2002) have distilled four mechanisms through which goal setting is able to affect individual performance:

1. Goals focus attention towards goal-relevant activities and away from goal-irrelevant activities.2. Goals serve as an energizer; higher goals will induce greater effort while low goals induce lesser effort.

3. Goals affect persistence; constraints with regard to resources will affect work pace.

4. Goals activate cognitive knowledge and strategies which allows employees to cope with the situation at hand.

SALES FORECASTING, QUOTA AND TERRITORY MANAGEMENT

Introduction

Demand forecasting is a useful tool for planning. It helps estimate and forecast the market share of a firm. Most firms are very often confronted with the task of projecting future sales of their product. Identifying future sales problems is no easy task for companies, small or big. In some cases, it is very difficult to get any information about future market sales. Sales forecasting is not just an estimation of sales; it is also matching sales opportunities — actual and potential—with sales planning and procedures.

What is Sales Forecasting?

Sales forecasting, according to Cundiff and Still, is “an estimate of sales during a specified future period which is tied to a proposed marketing plan and which assumes a particular set of uncontrollable and competitive forces.”

Steps in Sales Forecasting


http://en.wikipedia.org/wiki/Role

http://en.wikipedia.org/w/index.php?title=Cognitive_knowledge&action=edit&redlink=1

http://en.wikipedia.org/wiki/Motivation

1. Defining the objectives to be achieved.

2. Dividing various products into homogeneous groups.

3. Analyzing the importance of various factors to be studied for sales forecasting.

4. Selecting the method.

5. Collecting and analysing the related information.

6. Drawing conclusions from the analysis made.

7. Implementing the decisions taken.

8. Reviewing and revising the sales forecasting from time to time.

Methods of Sales Forecasting

Survey Method

The survey method is based on the opinion of buyers and consumers. It is useful with respect to industrial products but not as far as consumer goods are concerned.

Expert Opinion

According to this method, a company invites the opinions of executives and consultants who are acknowledged experts in studying sales trends.

Market Studies Method

This method is commonly used by marketers for consumer goods. It is also known as the Market Test Method.

Sales Force Opinion Method

This method estimates the buyers intentions from experienced personnel in the sales force. They can easily forecast for their respective territories.

Statistical Methods

Statistical methods are considered to be superior techniques of sales forecasting because their reliability is higher than that of other techniques. Some commonly used statistical methods are given below:

a) Trend Method

b) Graphical Method

c) Time Series Method

The Time Series Method shows the future trends of sales. The various techniques that can be used for determining these trends are:

i. Freehold or Graphical Method: This is the simplest method for obtaining a straight line. A trend line is fitted by freehand to know future sales.


ii. Semi Average Method: According to this method, data are divided into two parts, preferably with the same number of years.

For example, (3-year semi-averages)

Sales Quotas

Importance of Sales Quotas

Sales quotas serve several purposes. The important objectives are shown in the diagram below:

Sales Quotas

Quotas provide performance targetsQuotas provide standards Quotas provide control Quotas are motivational

Sales Objectives


Types of Sales Quotas

A sales organization can set many types of quotas. The most common quotas are shown in the following diagram:

Types of Sales Quotas

Sales Volume Quotas

ProfitQuotas

Expense Quotas

ActivityQuotas

QuotaCombinations

Territory Management

The following diagram outlines the activities of territory management

Why Establish Sales Territories?

A company can develop and use sales territories for various reasons. Some of the reasons are as follows:

To obtain entire coverage of the market

To establish a salesperson’s responsibility

To evaluate performance

To improve customer relations

To reduce sales expenses

To allow better matching of salesperson to customer

To benefit salespeople and the company.

Factors to be Considered when Designing Territories

In setting up or designing sales territories, these four steps must be followed:

1. Selecting a basic geographical control unit 2. Determining sales potentials in control unit


3. Combining control units into tentative territories

4. Adjusting for coverage difficulty and reallocating tentative territories.

The two basic approaches commonly used for designing sales territories are discussed below.

1. Market Build-up Approach

2. The Workload Approach

Sales Forecasting and Global Factors

With globalization of trade, it has become difficult to forecast accurately, more particularly for the long-term. Technological changes, sudden appearance of a competitor from any part of the world, selling the goods at competitive prices or even resorting to dumping, are some of the problems faced in accurate forecasting. It requires a well planned effort to take into consideration the factors influencing the sales strategy, so that sales forecasting may be a realistic one, as far as possible. This situation has been drafted by Warren J Keegan as follows:

In terms of cultural sensitivity, consumer products are more sensitive than industrial products. Another rule of thumb is that food products, especially those served at home, frequently exhibit the highest degree of cultural sensitivity. What this means to managers is that some products of daily life use are likely to demand significant adaptation. Others require only partial adaptation and still others are best left unchanged.

Three stages that a company must go through as follows :

1. Cave dweller. The primary motivation behind launching new products internationally is to dispose of excess production or increase plant-capacity utilization.

2. Naive nationalist. The company recognizes growth opportunities outside the domestic market. It realizes that cultures and markets differ from country to country and, as a result, it sees product adaptation as the only solution.

3. Globally sensitive. This company views regions or the entire world as a competitive marketplace. New-product opportunities are evaluated across countries, with some standardization planned as well as some differentiation to accommodate cultural variances. New-product planning processes and control systems are reasonably standardized.

SALES BUDGET

Introduction

A sales budget is a programme designed for a stipulated time frame that highlights the selling expenses and anticipated sales, quantitatively and in value terms. This helps in making an objective estimate of net profit on the selling operations.

There are three types of sales expenses:

1. Fixed Expenses: These expenses pertain to the compensation of salespersons, office rent, insurance and interest on fixed assets like vehicles, office space, office equipment, etc.

2. Performance-related Expenses: These include commissions, incentives, bonus and awards, etc.

3. Activity-related Expenses: These include travel and communication expenses, etc.


Significance of a Sales Budget

It serves as a scale, or a yardstick, to measure the performance/progress of the company in terms of the performance of the sales personnel, regions, products, marketing channels and customers.

It helps identify the areas in which the company needs to strengthen or improve its performance.

It serves as an indicator to control the expenses associated with the sales activity and to keep a constant watch on the net profits of the company.

It helps the planners to frame policies for actual market situations and provides the platform to establish ways and means to get the business where they want it to be.

It provides vital statistics to relate and dedicate the resources in an effective manner so as to realise the forecasted sales and convert these figures into reality.

It helps keep expenses under control so that by using scarce resources, the objective of net profits may be achieved.

Sales Budget (Factors to be considered)

The sales manager should take into consideration the following factors while preparing the sales budget:

Past sales figures and trend

Salesmen’s estimates

Plant capacity

General trade prospects

Orders on hand

Proposed expansion or discontinuance of products

Seasonal fluctuations

Potential market

Availability of material and supply

Financial aspect

Example

Sales Corporation Ltd has three sales divisions at Delhi, Jaipur and Lucknow. The company sells two products — Product A and Product B. The budgeted sales of the year ending 31st December 1998 at each place are given below:

Delhi : Product A 2,00,000 units @ Rs 16 each

Product B 1,40,000 units @ Rs 10 each

Jaipur : Product B 2,20,000 units @ Rs 10 each

Lucknow : Product A 3,00,000 units @ Rs 16 each

The actual sales during the same period were as follows:

Delhi : Product A 2,50,000 units @ Rs 16 each

Product B 1,50,000 units @ Rs 10 each

Jaipur : Product B 2,50,000 units @ Rs 10 each

Lucknow : Product A 3,10,000 units @ Rs 16 each


Steps in Designing a Sales Control System

1. Objective setting

2. Designing different control levels

3. Designing a reporting system and a feedback system

4. Deciding tools and techniques of control

5. Variance analysis and reasons thereof

Sales Audit

The Aim of the Audit

i. Find out the true and accurate position of sales.

ii. To exercise control over future planning and over the results of the company.

iii. To analyze the past performance and learn from mistakes made in the past or shortcomings in any operation of the sales department.

iv. To bring alertness to the organization.

v. To award increments, promotions, giving extra rewards in case of exceptional performances and to punish those whose actions have resulted in loss to the company.

Sales audit can be conducted in two ways:

By internal staff of the company.

By outside auditors like chartered accountants or consultants — experts in particular type of business activities.

Auditor’s Plans

An auditor can ask a number of questions.


What are the strengths, weaknesses, opportunities or threats to the company (known as SWOT analysis)?

What are the changes in consumer behaviour?

What are the major changes in market segmentation?

What are the changes in the major competitors’ strategies?

What are the changes in the competitive environment?

What are the pricing strategies of the competitors?

What are the main channels of distribution?

Have the marketing objectives been achieved or not?

What major advertising media are being used by the competitors?

Credit Control

Steps in Designing a Credit Control System

1. Identifying credit distributors and wholesalers or consumers on the basis of past experience.

2. Processing the credit sanction.

3. Circulating and implementing the credit sanction.

4. Aging analysis (see the format given below).

5. Reviewing credit sanctions from time to time.

CustomerCode

Customer’sName

CreditAmount

(Rs)

SanctionedDays

TotalOutstanding

(Rs)

Below60days(Rs)

60-120days(Rs)

Above120

days(Rs)

0005

0008

0014

M/s A.S Ltd

M/s Tara Ltd

M/s Gulati Bros

10,000

5,000

10,000

60

30

60

50,000

40,000

12,000

30,000

30,000

4,000

5,000

—

6,000

15,000

10,000

2,000

The following factors should be taken into consideration in the credit rating of dealers/distributors:

Organizational set-up of the firm

Market reputation

Trade line of dealers/distributors

Financial position of dealers/distributors

Analysis of financial statement

History of payments.

Budgetary Control

Budgetary control has become an essential tool of management for controlling costs and maximizing profits. The technique of budgetary control is, in fact, a must for every business enterprise. To exert control over the budgets, every organization has to set up an effective budgetary control system. The following factors should be examined at the time of budgetary control reporting:

What changes are most likely in the business environment?

What are the major objectives to be achieved?


Market Share Analysis

Ratio Analysis

The following ratios are useful for management control:

o Current ratioo Liquidity ratioo Proprietary ratioo GP ratioo NP ratioo Operating profit ratio

o Earnings per shareo Dividend payout ratioo Dividend per shareo Debtors turnover ratioo Average collection periodo Working capital turnover ratio

The following are some of the advantages of ratio analysis:

Ratio analysis helps in planning and forecasting.

It helps in intra-firm comparison.

It simplifies financial statements.

It helps in coordination, control and communication.

Variance Analysis

Comparison of standards with actual performance is required to understand the performance of sales. The difference of the actual from the standard is known as variance. The variance may be favorable or adverse according to circumstances. Sales variance is used in marketing control. It has many types.

Sales Analysis

Sales analysis is the detailed examination of sales volume by territory, salesperson, customer, product line, etc. It works on the basic principle that the trends of the total sales volume conceal rather than reveal the market reality. The following methods are used for sales analysis.

a. Sales Analysis by Territory

b. Sales Analysis by Salesperson

c. Sales Analysis by Product Line

d. Sales Analysis by Customer

Sales Cost Analysis

Sales cost analysis is a detailed examination of the costs incurred in the organization and administration of the sales and marketing functions and its impact on sales volume. The following are the important sales costs which should be kept in mind by a sales manager:


Cost of goods per rupee of sales

Profit per rupee of sales

Cost per segment

Cost per territory

Cost per salesperson

Cost per channel member

Average cost per order


unit 1 sales & distribution management

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